Economic growth slowing down

14/08/2008 15:00
  • Economic growth 2.8 percent in second quarter 2008
  • Growth below average level over 2007
  • Growth rates exports and government consumption slowing down
  • Natural gas production substantially higher, downturn across other branches

According to a first estimate released by Statistics Netherlands, economic growth was 2.8 percent in the second quarter of 2008 relative to the same period last year. The second quarter of 2008 had one extra working day compared to the second quarter of 2007. 
Economic growth is below the average level of 2007. There was a downturn in the growth of exports and government consumption. Except for natural gas, the output growth rate dropped across all branches in 2007. Employment increased by 160 thousand (2.1 percent) relative to a year ago. The increase is more or less the same as in the preceding quarters.

Quarter-on-quarter growth 0.0 percent

Compared to the previous quarter, the Dutch ecnomy recorded a zero economic growth in the second quarter of 2008. If the effects of seasonal variation and the amount of extra working days are taken into account, the volume of the gross domestic product (GDP) was the same as in the first quarter. For the first time in three years, there is no quarter-on-quarter growth.

Exports growth slackening off

In the second quarter of 2008, the exports volume of goods and services was 4.2 percent up on last year’s second quarter, whereas growth over the whole year 2007 was 6.5 percent. Exports of Dutch products grew by 4 percent. The robust increase in natural gas exports accounts for the high growth figure. Growth of re-exported goods dwindled to just over 5 percent. With a rate of 4.8 percent, imports grew more rapidly than exports.

Considerable shift in household consumption

Household spending rose by 2.3 percent in the second quarter – about the same as the average growth level over 2007 – but the factors that contribute to growth vary considerably. Growth in the second quarter was chiefly due to the much higher natural gas consumption and the introduction of the personal contribution in health care. It is hardly possible for consumers to affect these costs. With respect to other expenses, consumers were reluctant to spend their money and as a result consumption growth slowed down. Spending on consumer durables – the cyclically most sensitive category – increased only marginally relative to 2007. After correction for price increases, household spending on food and in the sector hotels and restaurants diminished.
The volume of government consumption was only 0.4 percent up on the same quarter last year. Higher real health care costs largely accounted for the modest increase.

Higher investments in computers and non-residential building

The investment growth rate for the second quarter was 6.6 percent, as against 4.9 percent in 2007. Investments were affected upwards by the high costs for royalties and licences. Investments in computers again rose substantially. Investments in non-residential building also rose distinctly. The growth rate of investments in housing, civil engineering and machinery ranged between 1 and 4 percent.

Output growth slowing down apart from gas sector

The sector mineral extraction again made a major contribution to economic growth in the second quarter. The volume of natural gas sold in the Netherlands and abroad increased markedly. In all other branches, output growth was below the average level over 2007. The growth rate slowed down most in the sector commercial services, in particular temp agencies, wholesale and retail trade and the sector hotels and restaurants. In manufacturing industry and construction, the slowdown was less prominent.  The construction sector recorded a robust output growth rate of 4.4 percent. The sector thrived due to higher investments in residential building.

Over 160 thousand extra jobs

Despite the slowdown in economic growth, the number of jobs increased by 164 thousand relative to a year ago. For the first time, there are more than 8 million jobs of employees, but the 2.1 percent growth is marginally down on the preceding quarters. The same applies to the quarter-on-quarter growth of 0.4 percent.